Lawyers spend lifetimes interpreting words. One type of such interpretation addresses the meaning of legislative texts governing agency decision-making, and a sub-type interprets the meaning of silence in those texts.[1] Silence can be significant. In fact, it can be outcome-determinative, particularly in situations involving asymmetry – i.e., when the text in one statutory provision that authorizes administrative action is counterbalanced by silence in another.
In U.S. trade regulatory cases, there has been a long history of cases involving the interpretation of the statutory texts and the meaning of statutory silence. This debate is currently active before the U.S. Court of Appeals for the Federal Circuit in cases interpreting the amendments to the anti-dumping statute enacted by Congress in 2015 that authorize the U.S. Department of Commerce to address “particular market situations” (“PMS”).
The statutory amendments permit Commerce to adjust the calculation of costs incurred by foreign exporters in manufacturing the merchandise that is subject to an anti-dumping proceeding, if a PMS exists “such that the costs of materials and fabrication or other processing of any kind does not accurately reflect the cost of production in the ordinary course of trade”. 19 U.S.C. § 1677b(e). This adjustment is authorized in the calculation of “constructed value” – i.e., in constructing the “normal value” to compare to export prices to determine the dumping margin in cases where home market sales prices have been rejected because they are below the “cost of production”. However, Congress enacted no provision authorizing a PMS adjustment for the purpose of calculating the cost of production in the first place. 19 U.S.C. § 1677b(b).[2]
Commerce interpreted the statutory silence as allowing it to consider whether a PMS exists and to apply cost adjustments in calculating the cost of production as well as the constructed value of the subject merchandise. In other words, it concluded that the lack of express language regarding PMS in the cost of production statutory provision did not entail a prohibition but rather a gap that the agency had the authority to fill. This logic was challenged by the foreign exporters in several cases, and the U.S. Court of International Trade (“CIT”) consistently rejected Commerce’s statutory interpretation.[3]
The issue recently came before the Court of Appeals in Hyundai Steel Co. v. United States, 19 F. 4th 1346 (Fed. Cir. 2021), and the Court affirmed the CIT’s rejection of Commerce’s interpretation. Under the Supreme Court’s long-established Chevron framework for judicial review of agency statutory interpretation, the first step is to determine whether a statute expressly addresses an issue, in which case the agency and the reviewing court must give effect to that “unambiguously expressed intent”. Id., 19 F. 4th at 1352 (quoting Chevron, 467 U.S. at 842). If not, then, in the second step of the analysis, the court must determine whether the agency has adopted a “permissible construction” of the statute.
In Hyundai Steel, the Court of Appeals reasoned that the express authorization for Commerce to consider PMS in the statutory provision governing constructed value but its absence from the statutory provision on cost of production did not create a “gap” that could be filled by Commerce. Rather, the legislative silence indicated a lack of authority to engage in a PMS analysis in calculating cost of production. Thus, this question was resolved under step one of the Chevron analysis (i.e., the express statutory language resolved the question), and the silence did not create an ambiguity that required a move to step two.
But why wasn’t the lack of PMS authority in the statutory cost of production provision a “silence” that required the move to Chevron step two and judicial deference to the agency’s reasoning? The Court’s response to this question was straightforward: “Because Congress amended section 1677b(e) to allow for a PMS adjustment, but did not amend section 1677b(b), it is reasonable to infer that Congress intended for the PMS adjustment to be available for calculations of constructed value, but not for calculations of the cost of production.” Hyundai Steel, 19 F. 4th at 1353. It noted that a failure expressly to prohibit an action is not the same as an authorization to take that action. The Court rejected petitioner’s argument that this logic was an “improper application” of the old canon of textual construction, expressio unius est exclusio alterius (i.e., the express mention of one thing impliedly excludes others). Id., 19 F. 4th at 1353 n.9.[4]
Whatever the analytic framework, it is not surprising that, considering the complexity and level of detail in the U.S. antidumping law, issues of textual silence and asymmetry have arisen on a number of occasions. And the judicial decisions do not appear to have articulated consistent principles to resolve those issues.
Several decisions declined to apply the “expressio unius” logic in interpreting statutory silence. For example, in one of the Federal Circuit’s earliest trade decisions after it was restructured in 1982, the Court affirmed Commerce’s policy of adjusting “foreign market value” (the pre-URAA term for normal value) to account for home market selling expenses in certain situations, even though there was no statutory provision granting authority to do so. This adjustment was perceived as necessary to counterbalance the adjustment to U.S. price for the same types of expenses, which was expressly authorized by statute. Smith-Corona Group v. United States, 713 F. 2d 1568 (Fed. Cir. 1983). The Court recognized an expansive grant of authority to Commerce to undertake such adjustments in fulfillment of the underlying statutory objective of achieving a “fair comparison”. Id., 713 F. 2d at 1578-79.
The same sort of interpretation of statutory silence as a gap to be filled, rather than as a prohibition against agency action, is found in JBF RAK LLC v. United States, 790 F. 3d 1358 (Fed. Cir. 2015). Here, the foreign exporter challenged Commerce’s use of its “targeted dumping” analysis and the “average-to-transaction” comparison methodology in annual administrative reviews even though the statute only authorized that methodology in investigations. The Court of Appeals concluded that the expressio unius argument “fail{ed}”. Id., 790 F. 3d at 1363. The statute did not specify the comparison methodology to be used in annual reviews, and the silence in this instance was interpreted as a gap, not a prohibition. Therefore, the Court concluded that it must turn to step 2 of the Chevron analysis to determine if Commerce’s interpretation of the statute was permissible, and the Court found that it was, because no source contradicted Commerce’s authority to use the same comparison methodology in reviews as in investigations.
But the Court of Appeals has also regularly applied the converse reasoning. For example, in Zenith Electronics Corp. v. United States, 988 F. 2d 1573 (Fed. Cir. 1993), the Court rejected Commerce’s attempt to address the asymmetry in the (pre-URAA) statutory text regarding the adjustment to export price for taxes that were collected on sales in the home country but forgiven on exports to the United States, by adding an ameliorative adjustment to foreign market value. The Court explained that the sole method authorized by the statute to address taxes forgiven on export was through an adjustment to export price, and it noted that “{t}he statute is not silent about the disparity created” between export price and foreign market value merely because it expressly provided only for the former. Id., 988 F. 2d at 1582.
Likewise, in FAG Italia S.p.A. v. United States, 291 F. 3d 806 (Fed. Cir. 2002), the statute authorized Commerce to conduct “duty absorption” inquiries only in the second and fourth years after an antidumping duty order was published. Commerce argued that it could conduct such inquiries in additional years, based on the absence of an explicit prohibition and silence in the legislative history. The Court of Appeals rejected this argument, stating that “no case of which we are aware holds that an administrative agency has authority to fill gaps in a statute that exist because of the absence of statutory authority.” Id. at 816.[5]
Can the two lines of analysis be reconciled? When does the absence of statutory text signify a gap that may be filled by Commerce, subject to a deferential standard of judicial review under Chevron step two, and when does it signify, under Chevron step one, that Congress withheld authority from Commerce to undertake the proposed action?
A recent effort to articulate the distinction was offered in the appeal of the Canadian Lumber countervailing duty expedited review, in which the CIT explained that “{s}tatutory silence regarding a specific issue is not . . . the same as the absence of statutory authority for an agency activity, in this case, CVD expedited reviews.”[6] The CIT quoted an earlier decision which, in turn, “characterized FAG Italia as drawing ‘a distinction between ambiguous statutory language that creates a “gap” in the statute that an agency could reasonably fill and a silence in the statute from which an agency cannot create authority’.”[7]
This is a valiant effort to distinguish a “gap” from “silence”. And the outcomes in the individual cases discussed above may have been correct in terms of resolving the specific issues that confronted the courts. But for the purpose of establishing a coherent framework to analyze this fundamental issue as it arises in future trade litigation, the job remains unfinished.
* * * * *
Through his 38 years of experience in the international trade regulatory field, Neil Ellis has worked extensively in cases interpreting the text of the U.S. trade laws. Please contact us at neil@neilellislaw.com with questions that you may have regarding those laws.
[1] The U.S. Supreme Court has recently expressed a willingness to rethink fundamental issues regarding Congressional delegation of authority to administrative agencies. See, e.g., AMG Capital Mgt LLC v. FTC, 141 S. Ct. 1341 (2021); West Va. v. EPA, S. Ct. No. 20-1530 (cert. granted). As a result, predictions abound that well-established principles of judicial review of agency decision-making, such as found in Chevron U.S.A. v. Nat. Res. Def. Council, 467 U.S. 837 (1984), may be subject to re-evaluation.
[2] The term “particular market situation” is found elsewhere in the antidumping statute. Thus, sales in the “ordinary course of trade” are defined to exclude sales for which a PMS is found to “prevent{} a proper comparison” between home market and export prices. 19 U.S.C. § 1677(15). See also 19 U.S.C. § 1677b(a)(1)(B)(ii)(III) (authorizing Commerce to use third country prices as the basis for normal value to compare to U.S. prices, unless it finds that a PMS in the third country “prevents a proper comparison”); 19 U.S.C. § 1677b(a)(1)(C)(iii) (authorizing Commerce to use third country prices for normal value when a PMS in the exporting country “does not permit a proper comparison” with the export prices).
[3] See, e.g., Saha Thai Steel Pipe Pub. Co. v. United States, 422 F. Supp. 3d 1363 (Ct. Int’l Trade 2019); Borusan Mannesmann Boru Sanayi ve Ticaret A.Ş. v. United States, 426 F. Supp. 3d 1395 (Ct. Int’l Trade 2020); Dong-A Steel Co. v. United States, 475 F. Supp. 3d 1317 (Ct. Int’l Trade 2020).
[4] The petitioner in Hyundai Steel has requested rehearing en banc by the full Court of Appeals, which is pending as of the date of this note. See Appellant’s Combined Petition for Rehearing and Rehearing En Banc, in Hyundai Steel Company v. United States, No. 2021-1748 (filed Feb. 8, 2022).
[5] The Court did the same with regard to Commerce’s adjustment to foreign market value for pre-sale home market freight despite the silence of the (pre-URAA) statute regarding that expense item and the express authorization only for the deduction of pre-sale freight on export sales. Commerce relied on “its inherent power as the administering authority to fill ‘gaps’ in the statutory framework in reasonable ways consistent with the objectives of the antidumping law.” Ad Hoc Committee v. United States, 13 F. 3d 398, 400-01 (Fed. Cir. 1994). The Court, however, rejected Commerce’s argument that the statutory silence comprised a “gap” that Commerce could fill, even if the asymmetry created a perceived unfairness in the dumping margin calculation. On the latter point the Court struggled somewhat to distinguish the precedent in Smith-Corona.
[6] COALITION v. United States, 483 F. Supp. 3d 1253, 1266 (Ct. Int’l Trade 2021) (“COALITION”) (finding that the lack of express statutory authority for Commerce to conduct a countervailing duty expedited review did not create a gap that Commerce could fill, but rather signified a lack of authority for Commerce to conduct such reviews). This case is currently on appeal to the Federal Circuit.
[7] COALITION, 483 F. Supp. 3d at 1266 n.22 (quoting Marine Harvest (Chile) S.A. v. United States, 244 F. Supp. 2d 1364, 1379 (Ct. Int’l Trade 2002)).